MNCs in the News-2015-03-13

China’s SAIC has fined American consumer products giant Procter & Gamble Co.’s Crest toothpaste division US $1 million for false advertising, the biggest fine ever, according to Chinese media, for this kind of issue. The SAIC charged Crest, the leader in China’s toothpaste market, had exaggerated the whitening effects of its toothpaste and used software to enhance images beyond what the government permitted in advertisements. The fine seemed to fit into China’s ongoing effort to enhance consumer protections which has ensnared a number of foreign firms suck as Nikon and Volkswagen and domestic firms such as Wuliangye and Tahitian Noni (“China Fines P&G’s Crest Nearly $1 Million over False Advertising Claims,” Reuters, March 9, 2015, http://www.reuters.com/assets/print?aid=USL4N0WC19L20150310; “Crest Fined $960,000 for False Advertising,” China Daily, March 10, 2015, http://www.chinadaily.com.cn/business/2015-03/10/content_19770950.htm; “Crest is Fined Nearly $1 Million in China,” The New York Times, March 10, 2015, http://www.nytimes.com/2015/03/11/business/international/crest-is-fined-...)

Stella International Holdings, a shoe supplier to Nike, Prada, and other leading brands such is facing a strike by workers after the Dongguan government, in southern China, issued regulations limiting how workers could use housing allowances. Specifically, workers are restricted to using funds to buy local properties even though they want to use the funds to buy properties elsewhere. Worker unrest related not only to the usage of funds but the amount of payments that Stella had given. Last spring, Adidas and Nike faced a strike by 40,000 workers at one of their suppliers, Yue Yuen, over social insurance payments (Julie Zhu, “China Shoe Factory Strike Highlights Benefit Fears,” Financial Times, March 11, 2015; “Chinese Designer Shoemaker Sees 5,000 Workers Strike,” BBC News, March 11, 2015, http://www.bbc.com/news/business-31829292)

China’s National Development and Reform Commission has stated that it will remove the ban on foreign control in China’s steel sector, which accounts for half of global steel production, that has been in effect in 2005. The move, part of the government’s broader effort to reduce restrictions on foreign investment, seems to flow from the government’s desire to address the severe problem of overcapacity in the steel industry. Whether or not the move would attract foreign investment was another matter given that the sector’s problems (“China Lifts Decade-Old Ban on Foreign Control over Steel,” Bloomberg, March 13, 2015, http://www.bloomberg.com/news/articles/2015-03-13/china-lifts-decade-old...)

Xiaomi, China’s leading smartphone maker, will start producing smart phones in India, which is one of the “world’s fastest-growing markets” and has plans to expand its research & development activities there. Xiaomi has been a huge success in India, which it entered in July 2014, with its feature-laden low-cost phones and is now the fifth-largest company in the Indian market. Hugo Barra, Xiaomi’s Vice-President of international operations, stated “there is nothing more powerful than being a local business.” Xiaomi is facing various patent lawsuits in India from Erickson and may construct various stores to enhance its connections with local consumers (“Chinese Smartphone Firm Xiaomi to Set up Production in India,” China Daily, March 13, 2015, http://www.chinadaily.com.cn/business/tech/2015-03/13/content_19798674.htm)

While China and Chinese companies often draw the headlines, Japanese firms also are actively pursuing railway projects globally. Firms like Hitachi and Mitsubishi Heavy Industries are working on, have struck deals for, or are bidding on contracts in places like Brazil, Malaysia, Qatar, Thailand, and the U.S. Japanese railway firms are facing intense competition from Chinese, French, and other companies. In response, Japan has been hosting high-speed railway seminars in other countries and also has been working to ensure infrastructure financing is available. Promoting railway exports is a major Japanese government economic growth promotion strategy (Keita Ikeda and Hiroyuki Ishida, “Overseas Railway Projects Involving Japan,” The Japan News, March 9, 2015, http://the-japan-news.com/news/article/0001991114)

Korea is enhancing the Incheon Free Economic Zone, which consists of three regions focused on different economic sectors and is strategically located close to Seoul, to enhance more foreign firms and investment. The IFEZ is a component of Korean President Park Geun-Hye’s quest to reduce burdensome regulations and attract more foreign investment which, in turn, it is hoped will boost growth. The IFEZ already has attracted a multi-billion dollar casino resort project from Hong Kong’s Chow Tai Fook Enterprises. Alibaba also is considering investing in a large shopping, hotels, and logistics complex in the area (Park Si-Soo, “Free Economic Zone Lures Investors with Deregulation Drive,” Korea Times, March 12, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/03/123_175098.html)

A large number of Korean businesspeople recently met with their counterparts in Qatar to investigate ways they might “boost bilateral investment and industrial cooperation.” Korean President Park Geun-Hye, who has been traveling to various Middle Eastern countries, participated in the forum. Korean business representatives touted that both countries are trying to develop new growth models and that the two countries had much to share in terms of information, knowledge, and knowhow. Korean companies were enthusiastic there would be opportunities to undertake infrastructure projects in Qatar (Park Si-soo, “Korea-Qatar to Bolster Business Cooperation,” Korea Times, March 8, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/03/123_174786.html)